The Three-Box Solution
By Vijay Govindarajan
(Harvard Business Review Press, 240 pages, $36.99)
Leaders instinctively know they must achieve a delicate balance, maintaining existing operations at peak performance while also innovating for the future. But renowned innovation expert Vijay Govindarajan, a professor at Dartmouth College's Tuck School of Business, says it's even more complicated than that: You must forget the past, manage the present, and create the future.
To help, he asks you to think of three boxes, representing the past, present and future. You need to be thinking of all three, all the time. "The Three-Box Solution requires an ability to think and act simultaneously in multiple time frames," he writes in The Three-Box Solution.
While difficult to accomplish, it's quite simple conceptually and appealing because the logic is readily apparent to any executive. Each box demands different managerial approaches. For example, when managing for the present, everything begins with strategic clarity; when managing innovation for the future, you are actually searching for strategic clarity.
The boxes also can compete with one another. The greater your success in the present, the more difficulty you will have in executing breakthrough strategies for the future – a problem he calls "the success trap." As for ditching existing activities, we all know how difficult that can be, yet failing to address the matter can limit your success today and tomorrow.
In Box 1, you run the core business at peak efficiency. Innovation occurs but it's linear, taking place within the existing business model to extend brands and improve product offerings. The focus is on short-term customer needs and optimizing operations for efficiency and cost. Leaders set challenging goals, analyze data to spot and address exceptions, and create a culture for high-level execution.
The future is actually built in Box 2, he says, where you let go of past practices, habits, activities and attitudes. That creates space and frees up resources that can be used to support unusual, non-linear ideas. But the past always fights back, he warns, and you will need to be prepared to make tough calls about the values you need to leave behind for success in the future, while remembering that some values are still needed for Box 1.
Box 3 is for experimentation and innovation, looking for a non-linear breakthrough that can take you to new heights. It involves learning new things and hedging risks, testing assumptions not only on the product you have in mind, but also the business model and market you hope to develop.
"It's not always obvious which ideas to pursue first – you need a method to gauge relative value and priority," he notes. Success rates will be low, so expect that. And don't trim your sails on Box 3 projects in a downturn, he warns. Judge how you are faring in this box not by revenue but the quality and pace of discovery from experiments.
To keep it simple, he offers these guiding principles:
- You should engage in both linear (Box 1) and non-linear (Box 3) innovations to ensure success in the future.
- Success in Box 1 is the primary inhibitor of taking bold action in Box 3. “You must develop the discipline of selectively forgetting the past (Box 2) or the past will prevent you from creating the future,” he writes.
- Organizing current business models in Box 1 and creating new business models in Box 3 must be pursued simultaneously. That’s tricky, since they call for different activities, skills, methods, metrics, mindsets, and leadership approaches.
- Managing the three boxes is not a flavour-of-the-month project but a long-term journey. It’s endlessly cyclical – you are always preserving the present, destroying the past, and building the future if you want to be successful. “Businesses fail at it when they are sporadic rather than continuous in seeking balance. Like gardens that need regular watering and weeding, each box requires ongoing attention,” he notes.
- Don’t think of the future as far in the distance. It’s today. You are building it, through Box 3 efforts, day by day.
- Don’t distract those who work in the core Box 1 from what should be demanding performance goals. “Box 1 cannot execute Box 3 innovations. And that is OK. Remember that Box 3 cannot exist without Box 1. Also, what must be forgotten for the purpose of Box 3 may be vitally important to Box 1,” he says.
- Box 2, forgetting the past, is the most indispensable element of the three-box effort. Using a football analogy, he describes Box 2 as the offensive line, providing time and flexibility for the quarterback – Box 3 – to read the defence, improvise, and execute.
"The Three-Box Solution imposes on leaders a requirement for humility because it is essentially a strategy for taking action through continuous learning," he said.
The book is clearly presented, with illuminating case studies from a variety of organizations helping to explain the ideas. While the opening chapter will suffice for some readers since it gives the essence of the model, those planning on adopting it will benefit from the later chapters, which offer more depth on each of the boxes and achieving balance between them.
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Retired U.S. Air Force colonel JV Venable calls on his military background to help leaders gain higher performance by Breaking the Trust Barrier (Berrett-Koehler, 189 pages, $27.50).
Consultants Peter Stark and Mary Kelly explain the kinds of behaviour that could sabotage your success in Why Leaders Fail (Bentley Press, 158 pages, $9.99 Kindle) and offer seven prescriptions for success.
In Intentional Relationships (Familius LLC, 159 pages, $24.95), consultant Ken Tucker explores how to work with others and succeed.
Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. E-mail Harvey Schachter